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Legislature to consider proposals for four-year, fixed-rate university tuition

Four-year guaranteed and regular tuition per semester for undergraduates entering in the 2012-13 academic year, not counting financial aid:

University of Texas at Dallas

15 credits or more, including required fees, for Texas residents

Guaranteed: $5,741

Regular: not offered

University of Texas at El Paso

15 credits, including required fees, for Texas residents

Guaranteed: $3,863

Regular: $3,509

Baylor University

12 credits or more, not counting a $1,565 general student fee and other required fees

Guaranteed: $16,855

Regular: $15,293

East Texas Baptist University

14 credits, not counting a $430 general student fee

Guaranteed: $10,654

Regular: $9,646

Source: Universities

Comprehensive coverage

This report is one in a series of stories previewing important state issues before the 83rd Legislature, which will convene Jan. 8.

If Gov. Rick Perry and an influential lawmaker get their way during the legislative session that begins in Jan. 8, many students who enroll in the state’s 38 public universities might never get hit with a tuition increase.

State Rep. Dan Branch, chairman of the House Higher Education Committee, has filed a measure that would require university governing boards to offer all entering undergraduate students, including transfer students, a fixed-rate tuition plan. Students who opt into the plan and graduate within four years would pay the same price each semester.

“What parents and students would get is certainty for their own budget as to what the cost is going to be,” said Branch, R-Dallas. “It also encourages completion in four years.”

Only 29 percent of public university students in Texas graduate in four years; after six years, 57 percent have done so.

Perry has been promoting fixed-rate, or guaranteed, tuition since 2009, at which time two of the state’s public schools — the University of Texas at Dallas and UT-El Paso — already had such plans in place. Since then, no other public university in the state has implemented fixed-rate tuition, even though all members of the schools’ governing boards, which control tuition, are Perry appointees.

Officials with national higher education associations estimate that three dozen public and private schools offer fixed-rate tuition. In Texas, private schools with the option include Baylor University in Waco and East Texas Baptist University in Marshall.

“One of the biggest benefits of these programs is that students and families won’t have to worry about the potential for unexpectedly high tuition increases during a student’s time in college,” said Tony Pals, a spokesman for the National Association of Independent Colleges and Universities. “For colleges, the major downside is that it makes institutional budgeting less flexible. For instance, if an unexpected budget shortfall occurs, a campus won’t be able to increase revenue as quickly as it otherwise could through institutionwide tuition increases.”

Public school administrators in Texas are especially wary of locking in tuition rates because of volatility in legislative funding. State lawmakers cut nearly $1 billion from the current two-year budget for higher education.

Fixed-rate tuition doesn’t necessarily save students any money. The reason: School officials tend to guard against the risk of a shortfall by raising tuition for each incoming class more than they would otherwise, given that students who opt for the fixed rate cannot be charged more for four years.

At Baylor, this fall’s fixed rate runs $1,562 more per semester than the regular rate, although the total outlays after four years are expected to be about the same, said Lori Fogleman, a university spokeswoman. Just 2 to 4 percent of each entering class opts for the guaranteed rate, she said.

The lack of action by Perry’s governing boards hasn’t discouraged the governor, who has made fixed-rate tuition a touchstone of his college affordability campaign.

Perry has also called for bachelor’s degree programs costing no more than $10,000 in academic and book charges over four years; fuller disclosure of the cost to students of taking four years, five years or longer to graduate; and hinging a portion of each school’s state funding on graduation rates, the number of degrees awarded and other so-called student outcomes.

Requiring schools to offer a four-year tuition guarantee would amount to a partial retreat from the Legislature’s 2003 “deregulation” of tuition, which gave essentially unfettered control of such matters to boards of regents. Although numerous bills have been offered since then to freeze tuition, limit increases or withdraw regents’ tuition-setting powers altogether, none has made it into law.

This time could be different, though, thanks to Branch’s support, Perry’s renewed push and general concern about the cost of higher education. The state Senate unanimously approved a measure in 2011 that would have limited tuition increases, with the strictest limits applied to UT-Austin, Texas A&M University, Texas State University and other schools whose academic charges rank in the top half of the state’s public universities; the measure died in the House.

Under Branch’s House Bill 29, regents would still determine tuition rates, and they could increase the price each year as new students enroll. Regents would also be free to raise required fees. If a student didn’t graduate in four years, his or her tuition would rise the next semester to the amount paid by those who enrolled a year after the student.

At UT-Dallas, all entering undergraduate and graduate students get a guaranteed rate, which includes mandatory fees. The university’s academic charges have been the highest among the state’s public schools for about 10 years and run $5,741 a semester for in-state undergraduates who enrolled this fall. That’s 2.8 percent more than the price for students who enrolled a year earlier.

The UT System Board of Regents put the fixed-rate plan into place at Dallas for the 2007-08 academic year at the recommendation of the school’s president, David Daniel.

Daniel said he came to appreciate fixed-rate tuition — after initially opposing it because he felt it tied administrators’ hands — in his previous job as a dean at the University of Illinois at Urbana-Champaign. A 1993 state law requires it at all public universities in Illinois.

Fixed-rate tuition fosters a long-term view of a university’s financial health, Daniel said. It also sends a strong signal to students that they are expected to graduate in four years.The four-year graduation rate at UT-Dallas rose from 42 percent in 2008 to 48 percent in 2010, third-highest among public universities in Texas, according to state figures.

Daniel conceded that tuition tends to be “front-loaded,” or increased for each incoming class more than it would be if officials were free to raise the price in subsequent years for that class. He acknowledged as well that the vagaries of legislative funding pose a special challenge.

“That’s the No. 1 drawback,” Daniel said. “It slows the ability of a university to react to reductions in state funding because the university can only apply tuition increases to the incoming class. But if you take the long view of it, it motivates you to graduate people so you can bring new people in.”

Daniel said he has not been able to convince another administrator in Texas or elsewhere that fixed-rate tuition is a good idea. “If I were at a different institution under different circumstances, I might have a different view,” he said, noting that UT-Dallas students are generally well-prepared for college.

Diana Kao, a former student body president, said UT-Dallas students are comfortable with the simplicity of fixed-rate tuition.

“It’s helpful knowing exactly what you’re going to pay for the next four years so you can figure out your budget,” Kao said, adding that it hasn’t been controversial among students.

Complicating factors

UT-El Paso has had a different experience. Just 58 students signed up for the fixed rate, which includes mandatory fees, when it was first offered in 2006-07. There were no takers this fall, as students chose to pay $3,509 per semester and risk future increases rather than $3,863 under the four-year guarantee.

Diana Natalico, UT-El Paso’s president, attributes the lack of interest to demographics. About 80 percent of her school’s undergraduates receive financial aid, and nearly half of those students report family incomes of $20,000 or less. The four-year graduation rate for the 2006 entering class was 11.5 percent.

“These are individuals who don’t have the luxury of long-term financial planning in the sense of paying a little more now for longer-term benefit later,” Natalicio said. “Most of them live from paycheck to paycheck.

“I think it’s also the case that they are reluctant to make a commitment to a four-year deal without sufficient assurance that they can look out on a four-year horizon and conclude that it’s a realistic projection for them,” she said.

School officials had been talking about discontinuing the fixed-rate option but have held off in light of the legislative proposal to require it, Natalicio said.

Other public universities in Texas haven’t moved to adopt fixed-rate tuition.

“At the present time, we have not formed an opinion on this subject,” said Steven Moore, spokesman for A&M System Chancellor John Sharp. “The chancellor is certainly aware of the discussion, but his emphasis has been on offering the most affordable education possible” at the system’s 11 universities “based on their unique audiences and histories.”

Mike Wintemute, a spokesman for the eight-campus Texas State University System, said: “Most of our students work, and many of them take longer than four years to complete their degrees. So I don’t know that a four-year, fixed-rate tuition plan would benefit most of our students, but it could benefit some or many. We’re just kind of waiting to see where the Legislature is going on this.”

UT-Austin President Bill Powers has said that he would explore the governor’s request to freeze tuition for each incoming class for four years. But in his state of the university address in September, Powers seemed to impose a condition that the Legislature, which writes a budget every two years, is unlikely to meet — namely, that a predictable stream of state appropriations should be provided for the same four years.

If universities have to take on the financial risk of guaranteeing tuition against a backdrop of uncertain legislative appropriations, they will tend to guess on the high side in setting tuition, predicted Kevin Hegarty, UT-Austin’s vice president and chief financial officer.

Of course, governing boards don’t always go along with administrators when it comes to tuition. In May, UT’s board voted to freeze academic charges at the Austin flagship at $4,896 per semester instead of approving Powers’ request for a 2.6 percent increase in each of two academic years. Perry had pressed university governing boards to hold the line on tuition.

Perry spokeswoman Catherine Frazier said the governor is confident that concerns about fixed-rate tuition “can be resolved in a manner that upholds the goal of promoting predictability and affordability of tuition at our higher education institutions.”

State Sen. Kel Seliger, chairman of the Senate Higher Education Committee, sounded a similar note: “I think we ought to be very open-minded and see to it that it’s both a benefit to students and not excessively burdensome to the institution.”